Publicis India, the country's sixth largest advertising agency by revenue, said it is planning to set up an outsourcing division to cash in on the offshoring trend.
With significantly higher margins in the business and a growing demand in the developed countries for Indian creative work, leading agencies such as Lowe, McCann Erickson, Ogilvy & Mather and Mudra, are mulling over outsourcing operations.
"Our goal is to double our revenues in the next three years. Among some of the new initiatives we have taken is the launch of a brand design agency Red Lion. We are also considering an outsourcing division," Nakul Chopra, the newly-appointed CEO of Publicis, South Asia, told Business Standard.
According to industry estimates, agency commissions in India are about 15 per cent, whereas margins in outsourcing work are as high as 30 to 40 per cent. Outsourcing in India could cut costs for clients by as high as 50 to 70 per cent. The outsourcing units would consist of a 24x7 studio or a set of studios that could deliver content with a faster turnaround time and comparatively lesser costs like in the IT BPO sector.
Catching up with the growing trend of outsroucing, some specialised agencies, such as Eon Premedia and Basil, have also sprung up in India. "Outsourcing is a business opportunity that may have a finite window in India. The Indian ad industry is also growing fast and hence the cost differential available now may not last long," Chopra added.
The Indian advertising industry is valued at about Rs 17,000 crore (Rs 170 billion) and is growing at about 20 per cent per year. The situation is similar to what happened with the business process outsourcing industry in the information technology sector a decade ago. Initially, the software talent and cost differential available in India were attractive but costs went up as the sector progressed in India.